Netflix stock’s ‘bearish engulfing’ warns that the uptrend may be over

The intraday swing lower in Netflix Inc.’s stock produced a textbook “bearish engulfing” reversal pattern, which candlestick chart watchers believe is a warning that the uptrend could be over.

After closing at a record of $130.93 on Friday, the stock
NFLX, -0.45%
opened even higher on Monday, rose to an all-time intraday high of $133.37, then turned lower. Monday’s close of $125.36, down 4.3% on the day, was below Friday’s open of $127.

As candlestick watchers describe, this pattern suggests that after bulls made a final thrust higher, they were overwhelmed by a counterattack by the bears. Read more: 7 key candlestick reversal patterns.

The fact that Monday’s close was also below Friday’s intraday low of $125.75 would lead non-candlestick chartists to call Monday’s action a “key reversal” pattern.

Some downside levels to watch include previous resistance at the Oct. 9 and Nov. 5 intraday highs between $115.50 and $116. Below that, previous supports at the Nov. 16 low of $101.86 and the October low of $96.26 become points of interest.

The previous ‘bearish engulfing’ in Netflix’s stock appears on Feb. 27, after which the stock fell 13% before bottoming on April 1.

FactSet

But in that case, the Feb. 26 close was just a 5 1/2-month high, and the Feb. 27 intraday high was below the Feb. 26 high. So while it was still a “bearish engulfing” reversal pattern, it didn’t have the “wow” factor that Monday’s pattern had.

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